• The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has published proposed amendments to the Export Administration Regulations (EAR) that would significantly expand the scope of the export controls over U.S. person activities and the shipment of otherwise uncontrolled items if military, military-support, intelligence or foreign-security end-users in or from many countries would be involved. The Directorate of Defense Trade Controls (DDTC) also published a proposed complementary revision to the ITAR’s definition of “defense services.” BIS also published proposed new item-based controls on facial recognition systems and related items. 
• Ensuring compliance with the proposed amendments to the EAR, if adopted, would require significant and, indeed, dramatic expansions of internal compliance programs, included additional and updated training, end-use and end-user certifications, and due diligence screening efforts involving suppliers, customers and distributors worldwide.
• Examples of transactions involving now uncontrolled commercial and consumer items that would require a license if the proposed changes were implemented include the shipment of any item subject to the EAR (e.g., all U.S.-origin items):
  • if for a “military end user” (as re-defined by the proposed rule), wherever located and regardless of whether listed, of China or any other arms embargoed country, even if for a civil end-use;
  • specified on the Commerce Control List (“CCL”) (including Anti-Terrorism-only controlled items) if for a “military-support end user” in China, regardless of whether listed or another arms embargoed country, even if for a civil application;
  • if for an “intelligence end user,” which is defined as including (i) a foreign intelligence service from not just arms embargoed countries but also most countries in the Middle East and many in Africa and Asia, and also (ii) any company from any country performing functions on behalf of these intelligence services; and
  • specified on the CCL that is for a “foreign-security end user,” which is defined as including governmental and other entities that have the authority to arrest, detain, monitor, search, or use force in furtherance of their official duties and other entities performing functions of such entities, of China or any other arms embargoed country.
• Examples of U.S. company or individual U.S. citizen “support” activities that would require a license include “facilitating” the transfer of uncontrolled foreign-origin commercial items:
  • to a “military end user,” whether listed or unlisted, or to listed “military-support end user” in or from China or any other arms embargoed country even if for a civil end-use, wherever located;
  • for a “military-production activity,” i.e., the incorporation of an item into or use of it to support a military item located in or destined to China or any other arms embargoed country, to any end-user wherever located;
  • to an “intelligence end user,” whether listed or unlisted, wherever located; or
  • to a listed “foreign-security end user,” wherever located.
• All the proposed controls are unilateral, which means that no other country has or has reported plans to impose such controls in their export control systems.
• Comments on the proposed new controls are due on or before September 27, 2024.

Background

As BIS described in its press release of July 25, 2024, the purpose of the proposed controls is to expand the scope of controls in the EAR over (i) U.S. person services involving foreign-origin items and (ii) the shipment of otherwise uncontrolled commodities, software and technology ("items") subject to the EAR that would support military, intelligence, or security entities in or from countries of concern. The controls over activities of U.S. persons in support of foreign military, intelligence or security services implement authority Congress gave to BIS in 2022, which is described in our January 5, 2023 client alert. As described in the press release and the client alert, Congress wanted BIS to impose more controls to address human rights concerns.

BIS’s proposed rules can be read here and here. A complementary proposed change to the definition of “defense services” in the International Traffic in Arms Regulations (ITAR) can be read here. The proposed rules are dense, full of nuance and variation, and take considerable time to work through to understand their full scope and implications. To help readers understand them and consider what comments they may want to make in response to BIS’s and DDTC’s requests for comments, this alert is divided into four “chapters.” Each section in the chapters describes (i) each proposed set of controls; (ii) the applicable definitions; (iii) the countries at issue; and (iv) the license review policies. Each section also includes comments to help readers better understand the scope and implications of the proposed changes.

Chapter 1 – Proposed End-User and End-Use Controls: This chapter describes and comments on the proposed new and amended end-user and end-use controls. End-use and end-user controls impose licensing obligations if there is “knowledge” that an item that would not otherwise require a license to export, reexport or transfer (in-country) would be for or involve a restricted end-use or end-user. The controls apply to U.S. and foreign persons in and out of the United States, so long as the item is subject to the EAR. BIS has proposed:

• expanding the China-specific military end-user and end-use controls to apply to all items subject to the EAR, including EAR99 items and Anti-Terrorism-only controlled items that are not currently subject to these controls;
• creating a “military-support end user” control;
• creating a “foreign-security end user” control;
• applying these end-user and end-use controls to all countries subject to arms embargoes; and
• creating an “intelligence end user” control that would apply not only to arms embargoed countries but also to most countries in the Middle East and many in Africa and Asia.

Chapter 2 - Proposed U.S. Person Controls: This chapter describes and comments on the proposed new U.S. person controls. BIS has proposed the creation of controls over U.S. person activities in “support” of:

• “military end users” (listed and unlisted) “in or from” China and other arms embargoed countries;
• “military-support end users” (listed);
• “military-production activities,” if such activity occurs in, or the product of such activity is destined to, China or other arms embargoed countries;
• “intelligence end users” which includes non-governmental and all other entities “performing functions on behalf of such organizations,” whether listed or unlisted, wherever located; or 
• “foreign-security end users” (listed), wherever located.

Chapter 3 - Proposed List-Based Control over Facial Recognition Systems and Related Items: This chapter describes the one list-based control BIS proposed, which is over facial recognition systems and related software and technology. A list-based control is different from a U.S. person control and an end-user or end-use control because it imposes a license requirement to export, reexport or transfer the listed item to or within specific countries regardless of the end-use or end-user. The end-user and end-use at issue will determine whether a license will be granted, but the end-user and the end-use do not create the license requirement.

Chapter 4 - Proposed Amendments to the ITAR’s Controls over “Defense Services”: This chapter describes DDTC’s proposed (i) clarifications to the ITAR’s definition of “defense services” and (ii) new defense services controls over intelligence assistance and military assistance that do not necessarily involve “defense articles,” i.e., items described on the ITAR’s U.S. Munitions List (USML). If a U.S. person control is a “defense service” subject to the ITAR, then the EAR’s U.S. persons controls would not apply to the activity.

• Request for Comments:
• BIS and DDTC have asked for comments on their proposed rules by September 27, 2024. In particular, BIS has asked for comments on (i) what the impact of the proposed controls would be on supply chains; (ii) the clarity of the controls for the sake of compliance; and (iii) the likely effectiveness of the proposed controls. DDTC stated that it does not believe that its proposed amendments will create a significant number of new license applications. DDTC stated that if someone believes that a planned activity would fall within the scope of the proposed new controls, DDTC asked for feedback on the costs and benefits of the new controls. DDTC also asked for comments on whether the proposed revisions are clear.
• Even if a company does not want to prepare or submit a comment, it should immediately begin to evaluate what it would need to change within its internal compliance programs and systems to ensure compliance. The types of EAR controls proposed differ considerably from what most multinational corporations account for now in their day-to-day business involving commercial and otherwise uncontrolled items and services.

Chapter 1 – The Proposed End-Use and End-User Controls

End-use and end-user controls impose licensing obligations when a U.S. or a foreign person is going to export, reexport or transfer an item “subject to the EAR” (e.g., all U.S.-origin items) that normally would not require a license to the destination if there is “knowledge” that it would be for a restricted end-use or end-user. BIS also has the authority to inform U.S. and foreign persons that otherwise uncontrolled items could be for a restricted end-use or end-user—and that, because of the notice, a license is required to ship the items.

For decades, the EAR have imposed end-use and end-use controls if an otherwise uncontrolled item would be exported, reexport or transferred (in-country) with “knowledge,” as defined in the EAR, that it was for the development, production or use of weapons of mass destruction (WMD), such as nuclear-related items, chemical/biological weapons or missile-related items. The Clinton administration created the Entity List to help exporters identify end-users involved in the development or production of WMD. The Bush administration created the China-specific military end-use controls. Each subsequent administration has amended and expanded the Entity List controls and the various country-specific military end-use and military end-user controls. In October 2022, BIS created end-use controls over the export, reexport or transfer of otherwise uncontrolled items if related to the development or production in China, or by Chinese companies outside of China, of supercomputers, advanced node integrated circuits, advanced computing items or front-end semiconductor production equipment.

I. Proposed Expansion of the “Military End Use” and “Military End User” Controls

A. Proposed Control

The proposed amendment to section 744.21(a) would prohibit without a license the export, reexport or transfer of any item subject to the EAR if there is “knowledge” that the item “is intended, entirely or in part, for,” a:

• “military end use”
  • when the “military end use” occurs “in” Macau or a Country Group D:5 country; or
  • when “the product of” a “military end use” “is destined to” Macau or a Country Group D:5 country; or
• to a “military end user” “wherever located, of” Macau or a country in Country Group D:5.

B. Definition of “Military End Use”

The existing EAR definition of “military end use” would remain essentially the same and mean the:

• “incorporation” outside the U.S. into a military item (i.e., a “defense article” described on the USML or a “600 series” item described on the CCL); and
• “any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbish, ‘development,’ or ‘production’” of such military items.

C. Definition of “Military End User”

The proposed revision to the definition of “military end user” would remove references to intelligence end users in the current definition and also entities that support “military end uses.” (Such entities would be identified in the new definitions of “intelligence end users” and “military-support end users.” ) At the same time, it would add a specific reference to entities that perform the functions of military end-users. Specifically, BIS proposes to amend the definition so that it would apply to:

• “the national armed services (army, navy, marine, air force, or coast guard), the national guard;”
• “any person or entity performing the functions of a ‘military end user,’ including mercenaries, paramilitary, or irregular forces;” and
• any entity on the Entity List with a footnote 3 or a (new) footnote 5 designation.

D. Country Scope

The countries subject to the “military end use” and “military end user” controls would be expanded to include all D:5 countries, which are the countries subject to arms embargoes, and Macau. The D:5 countries are Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China (including Hong Kong), Democratic Republic of the Congo, Cuba, Eritrea, Haiti, Iran, Iraq, North Korea, Lebanon, Libya, Nicaragua, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela and Zimbabwe.

E. License Review Policies

Licenses required by the “military end user” or “military end use” rules would be reviewed under a “presumption of denial” standard when involving Burma, China, Cuba, Iran, Macau, Nicaragua, North Korea, Syria or Venezuela. Applications involving Russia or Belarus would be reviewed under a “policy of denial” standard. All other applications would be reviewed under a “case-by-case” standard consistent with the ITAR’s licensing policies for such countries.

F. Comments

• The items subject to the proposed expansion of the “military end use” and “military end user” controls would be all items subject to the EAR, which would include EAR99 items. The current controls are limited only to the items that are identified in Supplement No. 2 to Part 744, which is a subset of the items controlled on the CCL for Anti-Terrorism-reasons only. From a compliance program screening point of view, this proposed change will have the most significant impact on U.S. and foreign persons that export, reexport or transfer (in-country) U.S.-origin items that are not described on any control lists. Thus, for example, a foreign person’s reexporting from abroad a U.S.-origin toothbrush (an EAR99 item) to China to an entity known to be a “military end user” would require a license even if the toothbrush would be used for purely non-military applications.
• As with the current “military end user” controls, the proposed control is not limited to shipments to “military end users” “in” the covered countries. The licensing obligation would apply to shipments to “military end users” “of” one of the arms embargoed countries “wherever located” in the world. Thus, a foreign person’s reexporting from abroad a U.S.-origin toothbrush to an entity in France that is known to be a “military end user” “of” China would require a license.
• The “military end use” control similarly would apply not only to military end-uses “in” the covered countries but also when the “product of” a “military end use” in any country is “is destined to” Macau or a Country Group D:5 country. Thus, for example, a foreign person could not ship without a license a U.S.-origin EAR99 item, such as a tool or software, from France to Germany with knowledge that the U.S.-origin item is intended, even in part, for the production of a foreign-made military item destined to China or another arms embargoed destination. Tools or software shipped with knowledge that they will be used to support or contribute to the operation, installation, maintenance, repair, overhaul, refurbishing of foreign-made military items destined to China or another arms embargoed destination would also now require license no matter where these activities were to occur.
• The definition of “military end use” continues to refer to military items regardless of whether they are U.S.- or foreign-origin and regardless of whether they are subject to the EAR or the ITAR.
• The second prong of the “military end user” definition is slightly narrower in part and broader in part than the existing definition, which includes “any person or entity whose actions or functions are intended to support” “military end uses.” Rather, the proposed new definition now refers to “any person or entity performing the functions of a 'military end user,' including mercenaries, paramilitary, or irregular forces.” BIS wrote that this “expansion is intended to capture private companies, non-state actors, or parastatal entities that engage in combat or other activities akin to those of traditional armed forces, other than the kinds of activities described below in connection with ‘military-support end users,’ which generally involves the design, development, production, installation, maintenance, repair, overhaul, or refurbishing of military items.”
• Although the “military end use” and “military end user” controls are limited to “items subject to the EAR,” such as all U.S.-origin items, the proposed new U.S. person controls (discussed below) would prohibit U.S. companies and individuals from providing support to the same “military end uses” and “military end users” from the covered countries when all the underlying items involved are foreign origin and not otherwise “subject to the EAR.”

II. Proposed New Controls on “Military-Support End Users”

A. Proposed Control

Proposed revised section 744.22(a) would require a license to export, reexport or transfer (in-country) an item subject to the EAR described on the CCL if there is “knowledge” that it is “intended, entirely or in part,” for:

• A “military-support end user” “in” a Country Group D:5 country or Macau; or
• An entity on the Entity List with a (new) footnote 6 designation, “wherever located.”

B. Definition of “Military-Support End User”

A “military-support end user” would be:

• “Any person or entity whose actions or functions support ‘military end uses;’” and
• Any entity on the Entity List with a footnote 6 designation.

C. License Review Policies

Licenses required by the “military-support end user” control would be reviewed under a “presumption of denial” policy when involving Macau, Burma, China, Cuba, Iran, North Korea, Syria or Venezuela. Licenses applications involving Russia and Belarus would be reviewed with a “policy of denial” standard. All other applications would be reviewed under a “case-by-case” standard consistent with the policies for such countries in the ITAR.

D. Comments

• Unlike the military end-use control, the “military-support end user control” is limited in scope only to items subject to the EAR that are described on the CCL. Thus, for example, it would not apply to the export of U.S.-origin EAR99 items. It would, however, apply to otherwise generally uncontrolled Anti-Terrorism-only items, such as 3A991 (basic semiconductors), 5A992 (consumer items with encryption), and 9A991 (civil aircraft parts) items. In other words, “military-support end users” that are listed on the Entity List might not be in Country Group D:5 countries or have any obvious connection to a Country Group D:5 country’s military end-users or military end-uses.
• The proposed definition of a “military-support end user,” i.e., a party whose “actions or functions support ‘military end uses,’” is slightly narrower than the existing definition of “military end user,” which includes within its scope those “whose actions or functions are intended to support” “military end uses.”
• The word “support” is not defined in this new control. This is different from the U.S. person controls, described below, which contain a broad definition of “support,” but which is applicable only to the U.S. person controls in section 744.6. Because the impact of the term is significant for due diligence and compliance efforts, and because different interpretations would lead to different applications of the control by different companies, a worthwhile comment to BIS would be for it to define the term.
• Unlike the “military end user” controls, the “military-support end user” controls for unlisted “military-support end users” only apply to such entities “in” (rather than “of”) a D:5 country or Macau. The controls against any “military-support end user” identified on the Entity List with a footnote 6 designation, however, will apply wherever in the world the entity is located.

III. Proposed Expanded Controls on “Intelligence End Users”

A. Proposed Control

BIS has proposed the creation of a new section 744.24(a) to require a license to export, reexport or transfer any item subject to the EAR if there is “knowledge” that the item is “intended, entirely or in part,” for an “intelligence end user,” “wherever located, that is from” a Country Group D (other than Israel) or E country.

B. Definition of “Intelligence End User”

An “intelligence end user” would mean:

• “Any foreign government intelligence, surveillance, or reconnaissance organizations;”
• “Other entities performing functions on behalf of such organizations;” and
• Entities designated with a (new) footnote 7 on the Entity List.

C. Country Scope

The countries at issue in this new control would be broader than those in the existing military-intelligence U.S. person control, which are limited to China, Russia, Belarus, Burma, Cambodia and Venezuela. The country scope would be expanded to also include all the remaining D and E group countries (other than Israel), which are (for a total of 45 countries):

• Middle East: Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen.
• Africa: Central African Republic, Democratic Republic of the Congo, Eritrea, Libya, Somalia, South Sudan, Sudan and Zimbabwe.
• Asia: Afghanistan, North Korea, Laos, Macau, Mongolia, Pakistan and Vietnam.
• Former Soviet Republics: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan.
• Americas: Cuba, Nicaragua and Haiti.

D. License Review Policies

Applications for licenses required by the “intelligence end user” rule would be reviewed under a “presumption of denial” standard involving Burma, China (including Hong Kong), Cuba, Iran, North Korea, Syria and Venezuela. Applications for licenses involving Russia and Belarus would be reviewed under a “policy of denial” standard. All other applications would be reviewed under a “case-by-case” review policy consistent with ITAR licensing policies for such countries.

E. Comments

• Unlike the other proposed new or revised end-user rules, this rule would apply to entities not only from arms-embargoed countries but also in or from most countries in the Middle East and many in Africa and Asia. Because it would apply to all items subject to the EAR, including EAR99 and Anti-Terrorism-only controlled items that normally do not require a license to ship to such countries, internal due diligence and end-use screening procedures for companies doing business in such countries and with companies from such countries anywhere in the world will need to be substantially revised if the proposed changes become final.
• The new controls would apply to all items subject to the EAR, which include all U.S.-origin commodities, software and technology, regardless of whether they are identified on the CCL and where they are in the world. Thus, for example, a foreign person’s transmission from outside the United States of an EAR99 U.S.-origin software update to a non-sanctioned telecom company in any country with knowledge that the company performs functions of any sort on behalf of an intelligence agency in or from any of the Middle East or other covered countries would be a violation of the EAR if done without a BIS license.
• BIS wrote that it intends that the prong of the definition applicable to entities relating to “performing functions on behalf” of government intelligence organizations would “include entities performing intelligence functions such as planning and directing, processing and exploiting, analyzing and producing, disseminating and integrating, surveilling, and evaluating and providing feedback. This definition is intended to cover traditional espionage and economic espionage activities.”

IV. Proposed Creation of a “Foreign-Security End Users” Control

A. Proposed Control

BIS proposed the creation of new section 744.25(a), which would require a license to export, reexport or transfer any item subject to the EAR described on the CCL if there is “knowledge” that the item is “intended, entirely, or in part,” for a “foreign-security end user” “of a country” in Country Groups D:5 or E.

B. Definition of “Foreign-Security End User”

The proposed rule would define “foreign-security end user” as being:

• “Governmental and other entities with the authority to arrest, detain, monitor, search, or use force in furtherance of their official duties, including persons or entities at all levels of the government police and security services from the national headquarters or the Ministry level, down to all subordinate agencies/bureaus (e.g., municipal, provincial, regional);”
• “Other persons or entities performing functions of a ‘foreign-security end user,’ such as arrest, detention, monitoring, or search, and may include analytic and data centers (e.g., genomic data centers) forensic laboratories, jails, prisons, other detention facilities, labor camps, and reeducation facilities;” and
• Entity List entities with a (new) footnote 8 designation.

C. Country Scope

The D:5 and E group countries are the countries subject to arms embargoes or broad economic sanctions. They are Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China (including Hong Kong), Democratic Republic of the Congo, Cuba, Eritrea, Haiti, Iran, Iraq, North Korea, Lebanon, Libya, Nicaragua, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela and Zimbabwe.

Unlike the other proposed end-user controls, this proposed control does not refer to Macau, which is in Country Groups D:1, D:3 and D:4, but not D:5 or E.

Unlike the proposed “intelligence end user control,” the proposed “foreign-security end user” controls would not apply to shipments to Middle East, African and Asian countries not subject to arms embargoes.

D. License Review Policy

License applications required by the “foreign-security end users” control will be “case-by-case” to determine whether there is “an unacceptable risk of use in human rights violations or abuses.” When such a risk exists, the licensing policy will be one of presumption of denial. The licensing policies will also align with U.S. government policies pertaining to arms-embargoed countries that are described in the ITAR.

E. Comments

• Unlike the other end-user controls, this proposed new control is limited in scope only to items subject to the EAR that are described on the CCL. Thus, for example, it would not apply to the export of U.S.-origin EAR99 items, but it would apply to Anti-Terrorism-only controlled items.
• In describing the policy bases for this proposed new control, BIS wrote that “state actors exploit advancements in technologies to reinforce existing repression; target civil society actors, human rights defenders, journalists, activists, and dissidents; surveil and profile women in all their diversity, ethnic, religious, and racial minorities, and other members of marginalized populations; censor speech; spread misinformation and disinformation; engage in mass surveillance; control the flow of information; infringe privacy; and suppress freedom through a variety of end users, including traditional law enforcement bodies, public security agencies, private prisons, and private contractors. These practices are not new, but advances in technology have supercharged the ability of such state actors to leverage new mechanisms to deploy their repressive agendas.”
• The purpose of the proposed new control would be “to provide visibility into the end uses and end users of [items on the CCL] and to contribute to efforts to prevent use of these items to violate or abuse human rights.”
• BIS stated that its definition of “foreign-security end users” would not apply “to civilian emergency medical, firefighting, and search-and-rescue end users. In situations in which a country integrates police, emergency medical, firefighting, and search-and-rescue services into a single public safety department, BIS seeks to ensure that the export, reexport, or transfer (in-country) of items necessary to protect lives is not disrupted and therefore would apply a case-by-case review standard.”
• BIS also wrote that it “seeks to ensure that the export, reexport, or transfer (in-country) of items necessary to protect lives at airport terminals, railway and rapid transit stations, and other public transport hubs is not disrupted. Where an entity that appears to satisfy the definition of ‘foreign-security end user’ but the end user is integrated into or organized under the military, the ‘Military End User’ control in section 744.21 applies.”

V. Conforming Changes to the Entity List-Related Licensing Policies

Consistent with the expanded use of footnotes on the Entity List to designate different types of restricted end-users, the different licensing requirements for each different type of listed end-user would be set out in a revised section 744.11. The different designations are significant because not all Entity List entities or footnoted entities have or would have license requirements over foreign-produced items subject to the EAR under one of the foreign direct product rules.

• The reference to footnote 3 entities, which are Russian and Belarusian military end-users, would reference the Russia/Belarus “military end user” foreign direct product rule. It would also refer to the U.S. person controls on activities involving such entities.
• The reference to footnote 5 entities, which are the identified “military end users” in additional countries, would cross-reference the U.S. person controls involving such end-users. There is not a foreign direct product rule associated with footnote 5 entities. (Media reports suggest that BIS may create a foreign direct product rule for footnote 5 entities in the future.) Because all identified military end-users would be added to the Entity List, the “Military End User” list would be removed.
• The reference to footnote 6 entities, which are the identified “military-support end users,” would cross-reference the controls on U.S. persons providing support to such end-users. There is not a foreign direct product rule associated with “military-support end users.”
• The reference to footnote 7 entities, which are the identified “intelligence end users,” would also cross-reference the U.S. person controls associated with such end-users. There is not a foreign direct product rule associated with “intelligence end users.”
• The reference to footnote 8 entities, which are the identified “foreign-security end users,” would also cross-reference the U.S. person controls related to such entities. There is not a foreign direct product rule associated with “foreign-security end users.”
• The rules for footnote 1 (e.g., Huawei-related companies) and footnote 4 entities would remain unchanged. There are significant foreign direct product rules that subject foreign-made items to the EAR if transactions involve either footnote 1 or 4 entities.
• There are not “footnote 2” Entity List entities.

VI. License Exceptions

The U.S. government-specific portion of License Exception GOV would be available for exports, reexports or transfers that would require a license under the proposed end-use and end-user controls. No other license exceptions would be available.

Chapter 2 – The Proposed New “U.S. Person” Controls

U.S. person controls are those that apply to activities of individual and corporate U.S. persons that “support” specific end-uses and end-users of concern even when all the commodities, software, and technologies involved are foreign-origin, outside the United States, and not otherwise subject to the EAR’s jurisdiction.

U.S. person controls are different from end-user and end-use controls because they apply to activities of U.S. companies and individuals when all the underlying items involved are foreign origin and not otherwise subject to the EAR. For decades, the EAR have required U.S. persons to get licenses to “support,” as broadly defined, the development, production, or use in specific countries of WMD when all the underlying items were not subject to the EAR. BIS also imposed in 2021 U.S. person controls for military-intelligence end-users and end-uses that now include such uses in China, Russia, Burma, Venezuela, Cambodia, Iran, Cuba, Syria and North Korea. In October 2022, BIS imposed U.S. person controls over activities that support the indigenous development or production in China of advanced node integrated circuits and front-end semiconductor production equipment for advanced node integrated circuits.

I. The Existing Definition of “U.S. Person” Would Remain Unchanged and Without Exclusions for Individuals Working for Companies in Specific Countries

A. Applicable Definition of “U.S. Person”

The meaning of “U.S. persons” in the context of the proposed new U.S. person controls would be the existing EAR definition, which is:

• Any individual who is a U.S. citizen, a permanent legal resident of the U.S. or a protected individual such as an asylee;
• Any company, association or entity organized under U.S. law, including their foreign branches; and
• Any person in the United States, such as a foreign person or a foreign company.

B. Comments

• The proposed new U.S. person controls do not contain any exclusions for “natural U.S. persons,” such as individual citizens employed for or working on behalf of a company headquartered in the United States or in allied or partner country. Exclusions from U.S. person controls for such individual persons would remain limited to the U.S. person controls associated with the support of the development or production of advanced node integrated circuits and advanced front-end semiconductor production equipment.
• This means, for example, that individual U.S. citizens and green card holders will be subject to all the new U.S. person controls regardless of where they are in the world and regardless of the nationality of their employer.
• Because all U.S. companies are “U.S. persons” and because the definition of “support” is quite broad, activities conducted overseas by foreign person employees or agents of a U.S. company will be within the scope of the controls applicable to the company.

II. The Definition of “Support” and New Proposed Exclusions from the Definition

A. The EAR’s Existing Definition of “Support” Would Apply But Would Have Some Exclusions and Would Not Completely Apply to Support of Foreign-Security End Users

The EAR’s applicable definition of “support” would remain unchanged, but BIS has proposed several exclusions from the scope of the definition (discussed further below). Thus, a “support” activity would continue to be any of the following acts:

• “Shipping or transmitting from one foreign country to another foreign country any item not subject to the EAR you know will be used in or by any of the end uses or end users described in [one of the applicable U.S. person controls], including the sending or taking of such item to or from foreign countries in any manner;”
• “Transferring (in-country) any item not subject to the EAR you know will be used in or by any of the end uses or end users described in [the applicable U.S. person controls];”
• “Facilitating such shipment, transmission, or transfer (in-country);” or
• “Performing any contract, service, or employment you know may assist or benefit any of the end uses or end users described in [the applicable U.S. person controls], including, but not limited to: ordering, buying, removing, concealing, storing, using, selling, loaning, disposing, servicing, financing, transporting, freight forwarding, or conducting negotiations to facilitate such activities.”

However, the first, second and fourth activities – the “shipping,” “transferring” and “performing” activities – would not apply if the end-user is a foreign-security end-user. The third activity—i.e., “facilitating” such shipments, transmissions or transfers—would apply to all restricted end-users, including a foreign-security end-user.

B. Comments on the Meaning of “Support”

• The application of various in-scope activities constituting “support” to certain restricted end-users is an example of how nuanced the proposed rules are—and how, as a result, the sophistication and size of internal compliance programs will need to expand to ensure compliance with the new rules if adopted.
• The EAR do not define “facilitating.” An example of how the Office of Foreign Assets Control (OFAC) has defined the term in the Iran sanctions regulations is 31 CFR § 560.417, which states that “a prohibited facilitation or approval of a transaction by a foreign person occurs, among other instances, when a United States person: (a) alters its operating policies or procedures, or those of a foreign affiliate, to permit a foreign affiliate to accept or perform a specific contract, engagement or transaction involving Iran or the Government of Iran without the approval of the United States person, where such transaction previously required approval by the United States person and such transaction by the foreign affiliate would be prohibited by this part if performed directly by a United States person or from the United States; (b) refers to a foreign person purchase orders, requests for bids, or similar business opportunities involving Iran or the Government of Iran to which the United States person could not directly respond as a result of the prohibitions contained in this part; or (c) changes the operating policies and procedures of a particular affiliate with the specific purpose of facilitating transactions that would be prohibited by this part if performed by a United States person or from the United States.” A good comment for submission to BIS would be whether U.S. persons should apply this type of definition to the EAR’s “facilitation” or a different definition.
• The meaning of “support” is much broader with respect to the proposed U.S. person controls than the definition of “support” with respect to the October 2022 U.S. person controls pertaining to the development or production in China of integrated circuits at facilities to produce advanced node integrated circuits or the development or production of advanced front-end semiconductor production equipment. The definition of “support” in those rules is now limited to (i) authorizing shipments of items not subject to the EAR; (ii) conducting the delivery of such items; and (iii) servicing items not subject to the EAR.

C. The Proposed Exclusions from the Definition of “Support”

BIS is proposing to exclude from the applicable definition of “support:”

• Activities related to items that are not subject to the EAR as specified in section 734.3(b), which includes items exclusively controlled for export or reexport by other U.S. government departments and agencies; certain published materials; and information and software that (i) are published, (ii) arise during, or result from, fundamental research; (iii) are released by instruction in a catalog course; (iv) appear in a patent or patent application not subject to an invention secrecy order; (v) are non-proprietary system descriptions; or (vi) are no more than telemetry data for spacecraft;
• Activities related to items enumerated on the USML or on the United States Munitions Import List (USMIL), to the extent such activities are subject to control under the ITAR;
• Basic administrative services, such as clerical and translation services, promoting company goodwill at trade shows, and “activities by an attorney that are limited to the provision of legal advice;”
• With respect to the proposed controls over U.S. person support of “military end users,” “military production activities,” and “intelligence end users,” commercial activities related to the movement of goods by common carriers; and
• Activities conducted for, on behalf of, or in connection with the U.S. government or a U.S. government program.

In addition, the movement of goods by common carriers would be excluded from the definition of “support” if with respect to (i) the development, production or use of WMD; or (ii) “foreign-security end users.”

D. Comments on the Proposed Exclusions from “Support”

• The proposed exclusion from the definition of “support” of administrative services tracks the exclusion of such activities from the ITAR’s definition of “brokering.”
• Although the common carrier exclusion is designed to not affect basic business operations of shipping lines and air carriers, a U.S. person’s efforts to ship an item not subject to the EAR with knowledge that it would support covered end uses would remain controlled.

III. Proposed Controls over U.S. Person Support of “Military End Users” and “Military-Support End Users” Controls

A. Proposed Control

Proposed section 744.6(b)(5) would prohibit a U.S. person from providing without a license “support” to:

• A “military end user” “in or from” a Country Group D:5 country or Macau;
• Entities on the Entity List with a footnote 3 or (new) footnote 5 designation (which are identified “military end users”); and
• “Military-support end users,” which, for purposes of the U.S. person support controls (but not the end user controls discussed above), the exclusive list of which will be (new) footnote 6 entities on the Entity List.

B. Country Scope

The D:5 group countries are those subject to arms embargoes, which are Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China (including Hong Kong), Democratic Republic of the Congo, Cuba, Eritrea, Haiti, Iran, Iraq, North Korea, Lebanon, Libya, Nicaragua, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela and Zimbabwe.

C. Definition of “Military End User”

The proposed EAR definition of “military end user” would remove references to intelligence end-users in the current definition (because they would be controlled separately) and would add in a reference to “military-support end users.” Specifically, BIS proposes to amend the definition so that it would apply to all of the following:

• “The national armed services (army, navy, marine, air force, or coast guard), the national guard;”
• “Any person or entity performing the functions of a “military end user,” including mercenaries, paramilitary, or irregular forces;” and
• Any entity on the Entity List with a footnote 3 or (new) footnote 5 designation.

D. Definition of “Military-Support End User”

The proposed definition refers to “any person or entity whose actions or functions support 'military end uses,'” and, which for purposes of the U.S. person support controls, includes only entities designated with a footnote 6 designation on the Entity List.

E. Comments

• Unlike with respect to U.S. person controls on support for “military end users,” BIS’s proposed U.S. person controls related to “military-support end users” will apply only to support for entities on the Entity List with a footnote 6 designation, which are only a subset of “military-support end users” as defined in proposed section 744.22(f).
• The control would apply to U.S. person support for Chinese, Russian, or other covered “military end users,” wherever located, because of the use of the phrase “in or from” when defining the scope of the control. Thus, for example, a U.S. person’s support for an end-user in France would be controlled under this provision if provided with “knowledge” that the end-user is a “military end user” “from” China. If this control is adopted, due diligence programs to screen recipients of support services in any country will need to be considerably adjusted to ensure compliance.
• Although specific “military end users” and “military-support end users” will be identified on the Entity List with footnote 3, 5, or 6 designations, the control will continue to apply to unlisted “military end users” “in or from” the covered countries.
• The proposed definition of “military end user” is slightly narrower than the current definition, which also applies to “any person or entity whose actions or functions are intended to support 'military end uses.'” The control, however, will apply to “military-support end users,” the exclusive list of which will be footnote 6 entities on the Entity List.
• A U.S. person’s “facilitation” of a military end-user’s acquisition of foreign-origin items that are of a type that would be subject to the EAR if in the U.S. (and not described on the USML or the USMIL) would constitute “support” for a “military end user” or “military-support end user.”
• A U.S. person’s performance of basic repair of items not described on the USML or the USMIL that are owned or used by a military end-user would constitute “support” for a “military end user.”
• Companies will need to take additional efforts to vet overseas companies that are providing security services. Mercenaries do not generally market themselves as “mercenaries.”
• Restrictions on support for footnote 6 entities will only apply when the support activities relate to items described in the license requirement provision of the Entity List designation “or their foreign-origin equivalents.”

IV. Proposed U.S. Person Controls Over Support for “Military-Production Activities”

A. Proposed Control

Proposed section 744.6(b)(6) would prohibit a U.S. person from providing without a license “support” when:

• Such activity occurs in a country listed in Country Group D:5 or Macau; or
• The product of such activity is destined to a country listed in Country Group D:5 or Macau.

B. Definition of “Military Production Activity”

“Military-production activity” would mean “incorporation into the following types of items or any other activity that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, 'development' or 'production' of:

• '600 series' items (which are military items identified on the CCL), including foreign-origin items not subject to the EAR; and
• Any other item described on the CCL, or that is an EAR99 item, 'including foreign-origin items not subject to the EAR, that you "know" is ultimately destined to or for use by a "military end user."'”

C. Country Scope

The D:5 group countries are those subject to arms embargoes, which are Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China (including Hong Kong), Democratic Republic of the Congo, Cuba, Eritrea, Haiti, Iran, Iraq, North Korea, Lebanon, Libya, Nicaragua, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela and Zimbabwe.

D. Comments

• The new control would not apply to activities directly related to “defense articles,” i.e., articles described on the USML or USMIL. That is, it would not apply to activities that are “defense services” subject to ITAR.
• The control is, however, akin to ITAR’s controls on defense services but broader in many cases. If, for example, a U.S. company or an individual U.S. citizen were to provide “support” to the development or production of a foreign-origin item in France that is not described on any control lists with “knowledge” that the otherwise uncontrolled item was destined to or for use by a military end-user in China, even for a civil application, then a license would be required (and presumptively denied).
• BIS noted that a U.S. person assisting a defense contractor in a targeted country in producing an armored vehicle or installing a light system on a submersible vessel would be controlled event. In addition, the provision by a U.S. person of assistance to an electronics company in a targeted country in developing integrated circuits that have been ordered by the armed services of a targeted country would be a controlled event.
• Thus, to ensure compliance, U.S. companies would need to modify their compliance programs to ensure that none of their employees or others acting on their behalf were providing support to the development, production, or use of either military items or non-military and otherwise uncontrolled items destined to or for use by a military end-user in one of the arms embargoed countries.

V. Proposed U.S. Person Controls Over Support for “Intelligence End Users”

A. Proposed Control

Proposed section 744.6(b)(7) would prohibit a U.S. person without a license from providing “support” to an “intelligence end user,” wherever located, if:

• from a Country Group D (other than Israel) or Country Group E; or
• identified on the Entity List with a footnote 7 designation.

B. Definition of an “Intelligence End User”

An “intelligence end user” would be:

• “any foreign government intelligence, surveillance, or reconnaissance organizations;”
• “other entities performing functions on behalf of such organizations;” or
• an Entity List entity with a footnote 7 designation.

C. Country Scope

The countries at issue in this new control would be broader than those in the existing military-intelligence U.S. person control, which are limited to China, Russia, Belarus, Burma, Cambodia, and Venezuela. The country scope would be expanded to also include all the remaining D and E group countries (other than Israel), which are:

• Middle East: Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen.
• Africa: Central African Republic, Democratic Republic of the Congo, Eritrea, Libya, Somalia, South Sudan, Sudan and Zimbabwe.
• Asia: Afghanistan, North Korea, Laos, Macau, Mongolia, Pakistan and Vietnam.
• Former Soviet Republics: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan.
• Americas: Cuba, Nicaragua and Haiti.

D. Comments

• The change would remove the existing restrictions on U.S. persons for “military-intelligence” end-uses and end-users. The scope of the proposed controls would be much broader because it would also apply to civilian intelligence end-users.
• The purpose of this expanded new control would be to allow the U.S. government to review contemplated transactions involving intelligence, surveillance or reconnaissance organizations in these countries.
• The new control would apply not only to the government intelligence, surveillance or reconnaissance organizations, but also “other entities performing functions on behalf of such entities.” Examples of covered activities would include, according to BIS, “performing intelligence functions such as planning and directing, processing and exploiting, analyzing and producing, disseminating and integrating, surveilling, and evaluating and providing feedback. This definition is intended to cover traditional espionage and economic espionage activities.”
• Examples of covered activities would also include, according to BIS, (i) “maintenance, repair, overhaul, or refurbishing of items which if located in the United States would be subject to the EAR that are owned by or will be used by or to support ‘intelligence end users;’” and (ii) “information technology services to support ordinary business activities that are not specific to a particular business field.”
• To ensure compliance, U.S. companies would need to modify their compliance programs to determine whether any of the end-users of their “support” activities would be, in or from the list of covered countries, (i) a government intelligence, surveillance, or reconnaissance organization; or (ii) an entity “performing functions on behalf of such organizations.”
• Individual U.S. persons performing services in or involving such countries or entities will need to determine if their services are included within the EAR’s revised definition of “support” and whether any of the recipients of any covered services are such government entities or non-government entities that “performed functions on behalf of” covered government organizations.
• These U.S. person controls are not now subject to any controls under any part of U.S. law. This means, for example, that U.S. expatriates who provide “support,” as broadly defined, to “intelligence end-users” in or from the covered Middle East and other countries that are not now “defense services” would become subject to new licensing obligations to continue to provide such support.
• DDTC’s proposed rule includes specific new controls on the USML to control U.S. person assistance that creates, supports or improves intelligence activities, regardless of whether such assistance involves the use of a defense article. DDTC proposes several exclusions to the scope of its controls, many of which align with exclusions in this proposed U.S. person control.
• BIS’s proposed rule would, however, regulate, with respect to Country Group D (other than Israel) and E countries, the types of U.S. person “support” for “intelligence end users” that DDTC proposes to exclude from the scope of defense services controls and which BIS does not exclude from control under this proposed control. Thus, U.S. persons will need a BIS license before performing the following types of activities with respect to “intelligence end users” of the targeted countries:
  • maintaining, repairing, overhauling, or refurbishing items that, if located in the United States would be subject to the EAR, “that are owned by or will be used by or to support ‘intelligence end users;'” or
  • providing “information technology services to support ordinary business activities that are not specific to a particular business.”“Information technology services to support ordinary business activities that are not specific to a particular business.”

VI. Proposed Controls over U.S. Person Support of “Foreign-Security End Users”

A. Proposed Control

BIS has proposed the creation of a new section 744.6(b)(8) that would prohibit a U.S. person from providing without a license “support” to a “foreign-security end user” with a footnote 8 designation on the Entity List.

B. Definition of a “Foreign-Security End User”

The proposed rule would define “foreign-security end user” as being any of the following:

• “governmental and other entities with the authority to arrest, detain, monitor, search, or use force in furtherance of their official duties, including persons or entities at all levels of the government police and security services from the national headquarters or the Ministry level, down to all subordinate agencies/bureaus (e.g., municipal, provincial, regional);”
• “other persons or entities performing functions of a ‘foreign-security end user,’ such as arrest, detention, monitoring, or search, and may include analytic and data centers (e.g., genomic data centers) forensic laboratories, jails, prisons, other detention facilities, labor camps, and reeducation facilities;” or
• entities designated with a footnote 8 on the Entity List.

C. Comments

• Although the definition of “foreign-security end user” is broader than just those entities with a footnote 8 designation, the licensing obligation would only apply to U.S. person “support” of footnote 8 entities. BIS will be responsible for identifying those footnoted “foreign-security end users.” Thus, the scope of the U.S. person control is narrower than the corresponding foreign-security end-user control, which applies to both listed and unlisted “foreign-security end users.”
• Note 1 to the definition would state that the definition would not include civilian emergency medical, firefighting and search-and-rescue end-users.
• Note 2 to the definition would state that if the end-user is a “military end user,” then the U.S. person controls pertaining to a “military end user” would apply.

VII. General Order for Activities Required to Perform “Defense Services”

BIS proposes the creation of a general order that would authorize U.S. persons to perform covered activities if the activities are required to perform ITAR-controlled defense services that DDTC has authorized.

VIII. License Exceptions

No license exceptions would be available for any of existing or proposed new U.S. person controls. The proposed rule, however, would create a novel “exclusion” authorization from the proposed new U.S. person controls in support of “military end users,” “military production activities” or “intelligence end users.” Specifically, U.S. persons who are U.S. government employees or contractor support personnel may “support” such end-users if the “support” is provided in the performance of authorized official duties. This exclusion authorization is not available if the U.S. government agency acts as an agent on behalf of a non-U.S. Government person. This exclusion would not apply to any U.S. Government or contractor support for foreign-security end-users.

Chapter 3 – Proposed Controls over Facial Recognition Systems and Related Items

I. The Proposed Commodity Control

BIS proposes an amendment to existing Export Control Classification Number (ECCN) 3A981 to control “facial recognition systems; and specially designed components and accessories therefor.”

The proposed 3A981 control does not define “facial recognition systems.” BIS, however, proposed a note stating that the control would not apply to:

• “detection or authentication items versus identification items;” and
• “items that facilitate individual access to personal devices or facilities.”

II. The Proposed Software Control

As a result of the proposed changes to ECCN 3A981, ECCN 3D980.a would control software “specially designed” for the “development,” “production” or “use” of (i) “facial recognition systems” and (ii) “specially designed” “components” and “accessories” for “facial recognition systems.”

In addition, BIS proposed a new ECCN 3A980.b to control “software ‘specially designed’ for the analysis and matching of voice, fingerprints, or facial features for facial recognition.” The control would not include “software solely for person or object detection or for individual authentication to facilitate individual access to personal devices or facilities.”

III. The Proposed Technology Control

ECCN 3E980 would not be amended, but, as a result of the other proposed changes, it would control “‘technology’ ‘specially designed’ for the ‘development,’ ‘production,’ or ‘use’ of ‘facial recognition systems,’ and ‘specially designed’ ‘components’ and ‘accessories’ therefor.”

IV. Licensing Requirements and Licensing Policy

The systems, components, accessories, software and technology that would become controlled under the proposed rule would be controlled for Crime Control Column 1 (CC1) reasons. This means that a license would be required to export, reexport and transfer (in-country) such items worldwide except to Australia, Canada, India, Japan, New Zealand, South Korea, and Allies and partners in Europe.

The licensing policy for such items is “considered favorably on a case-by-case basis, unless there is civil disorder in the country or region or unless there is a risk that the items will be used to violate or abuse human rights. The judicious use of export controls is intended to deter human rights violations and abuses, distance the United States from such violations and abuses, and avoid contributing to civil disorder in a country or region.”

V. Background to the Proposed Control

In December of 2021, the Biden administration launched the Export Control and Human Rights Initiative (ECHRI) with partners and allies to “curb the proliferation of technology that has been misused by governments for repression.” Almost two years later at the ECHRI Plenary, Assistant Secretary of Commerce for Export Administration Thea Kendler remarked that BIS was “keenly focused on appropriately controlling new advanced surveillance tech to inhibit U.S. software and technology from being misused, and to ensure human rights-related export controls reflect the realities of today, with an eye on the future.”

In addition, BIS stated the following as the policy justification for the proposed control:

“Facial recognition technology coupled with artificial intelligence technology has bolstered the ability of foreign-security end users, such as law enforcement agencies (municipal, provincial, regional, national) and other government affiliated entities to target victims at a higher rate, leading to increased capabilities for violations or abuses of human rights. Working in concert, these technologies can log countless images to help state actors of concern arbitrarily and unlawfully track, mistreat, detain, and monitor people. Facial recognition technology can be used to draw inferences about individuals, such as inferences about ethnicity or religion, that can result in discriminatory treatment or detention. Previously, this same task would have been accomplished manually with a cost of thousands of hours and was difficult or impossible to perform at scale. In this way, advances in digital technology can be weaponized to deploy repressive tactics at lower cost, with greater ease, and larger impact.

. . .

One of the ways facial recognition systems identify or verify a person from a digital image or a video frame is by comparing selected facial features from an input image to the features of faces stored in a database. The major components of such systems are input camera(s), data storage, processing computers, and the software algorithms needed to model facial images. There is no longer any effective difference between systems that require active permission by the subject and systems that can be utilized clandestinely, whether for individual or crowd identification. The capture components of these systems can be very small and easily concealable. Targets can employ limited measures to thwart identification, but these measures are expected to be less effective and less available as the technology matures.”

Chapter 4 – DDTC’S Proposed Revisions to the Definition of “Defense Services”

I. Background

For several years, DDTC has been reviewing which U.S. person activities (i) provide a critical military or intelligence advantage such that they warrant control under the ITAR but are not subject to the ITAR; and (ii) are subject to the ITAR, but not described as clearly as possible. During this review, DDTC stated that it identified certain military, cyber and intelligence services for foreign persons that are not subject to the ITAR and some ways to clarify the existing definitions.

DDTC’s proposed revision to the definition and addition of two specific defense services to the USML complement the BIS policy objectives for its proposed U.S. person controls. If a U.S. person activity is subject to the ITAR as a “defense service,” then the EAR’s U.S. person controls would not apply to the activity.

DDTC also included commentary describing when the ITAR or the EAR apply to a service to avoid duplicative licensing requirements. It reiterated the long-standing principle that the repair or maintenance of an item subject to the EAR when isolated from a defense article will be subject to the EAR (i.e., that such repair and maintenance is not an ITAR defense service). It also stated that the repair or maintenance of commodities or software subject to the ITAR is a “defense service,” “including when repairing an EAR commodity or software incorporated into a defense article.” The issue of whether this latter statement is indeed a long-standing principle is worth a close review and comments to DDTC.

II. Proposed Clarifications to the Definition of “Defense Services”

DDTC proposes amending the ITAR’s definition of “defense services” by revising the list in paragraph 120.32(a)(1) of regulated activities to include “assistance, including training or consulting, to foreign persons in the development (including, e.g., design), production (including, e.g., engineering and manufacture), assembly, testing, repair, maintenance, modification, disabling, degradation, destruction, operation, processing, use, or demilitarization of a defense article.”

This proposed list would add two new references to the existing definition, “disabling” and “degradation.” DDTC wrote that the proposed revision “clarifies that cyber services, or any other activities, that disable and degrade defense articles, but fall short of total destruction or demilitarization, are included within the definition of defense services.”

In describing the “assistance” to which the definition applies, DDTC proposes to replace the “training” parenthetical with a new clause clarifying that “assistance” includes “training and consulting.”

III. Proposed Additions of “Defense Services” to the USML

Current paragraph (a)(2) of the definition of “defense services” would be removed because providing technical data to a foreign person is already a controlled event. In its place, DDTC proposes to add references to two new USML paragraphs—IX(s)(2) and IX(s)(3)—that would control defense services related to intelligence and military assistance that do not necessarily relate to defense articles. The proposed new controls have a “catch and release” structure. They have broad control “catches” and then “release” specific types of activities.

A. Proposed Intelligence Assistance Control

Proposed USML paragraph IX(s)(2) would control the provision of “assistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves intelligence activities, including through planning, conducting, leading, providing analysis for, participating in, evaluating, or otherwise consulting on such activities, for compensation,” except for the following specific types of assistance:

• “furnishing of medical, translation, financial, insurance, legal, scheduling, or administrative services, or acting as a common carrier;”
• “participation as a member of a regular military force of a foreign nation by a U.S. person who has been drafted into such a force;”
• “training and advice that is entirely composed of general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities;”
• “information technology services that support ordinary business activities not specific to a particular business sector;”
• “any lawfully authorized investigative, protective, or intelligence activity of a law enforcement or intelligence agency of the United States or of a territory, possession, State, or District of the United States, including political subdivisions thereof;” and
• “maintenance or repair of a commodity or software.”

B. Proposed Military Assistance Control

Proposed USML paragraph IX(s)(3) would control the provision of “assistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves:

• 'the organization or formation of military or paramilitary forces;'
• 'military or paramilitary operations, by planning, leading, or evaluating such operations;' or
• 'military or paramilitary capabilities through advice or training, including formal or informal instruction.'”

Controlled assistance would not include the first three exclusions in the intelligence assistance control, i.e., those related to certain services, participating in a regular military force if drafted, and training based on information taught in schools. Thus, the provision of the types of information technology, investigative, or maintenance or repair of a commodity or software in the other three carve-outs from the intelligence assistance control would still be controlled if the assistance meets the definition of the military assistance control.

C. Comments

• The rule is an expansion of existing defense services controls to cover activities that do not relate to “defense articles” or “training” of military forces, but instead are based on the types of end-users involved. Key undefined terms and phrases in the military assistance control that could create interpretive issues for U.S. persons doing business, directly or indirectly, with foreign governments include “consulting,” “organization . . . of military . . . forces,” “operations,” “capabilities,” and “advice.” The intelligence control contains even broader language with additional undefined terms. Comments on the rule could help provide examples or seek clarification on these aspects of the rule. 
• A request for clarification regarding the reference in the preamble to the proposed rule regarding the repair of EAR items installed in ITAR items under the definition of defense services would be a useful comment and clarification request. That is, a good comment would be to ask DDTC to explain how repairing only a 600 series or other items subject to the EAR inside of a defense article could be a defense service if the sole object of the assistance is not a defense article. Would this mean that a U.S. person’s changing a tire, without more, on a foreign military vehicle or aircraft would be a “defense service?”
• A proposed exclusion from the proposed intelligence defense service control is “maintenance or repair of a commodity or software.” The proposed revision to the definition of “defense services,” however, does not contain such an exclusion. This difference might suggest to some that maintaining or repairing non-ITAR-controlled equipment that is used to produce a defense article is a “defense service.”  A comment asking DDTC to respond to this possible interpretation or to add the same exclusions to the definition of “defense services” would be useful.
• As discussed above, BIS’s proposed U.S. person control over “military-production activities” would impose a licensing requirement over a U.S. person’s supporting or contributing to the development, production, or use of non-ITAR controlled military items in an embargoed country or anywhere if the product is ultimately destined to a military end-user in an embargoed country. So that there is clarity that the definitions do not overlap, a good comment would be to ask DDTC to confirm that a U.S. person’s provision of assistance in the development, production, or use of a non-military item would not be within the scope of the definition of a “defense service.”